The general aim of the proposed research is to advance scientific knowledge concerning psychological approaches in the treatment of panic disorder with agoraphobia. More specifically, we propose to investigate the singular and combined efficacy of two distinct psychological approaches, i.e., a treatment that targets panic, (panic inoculation) and a treatment that targets agoraphobic avoidance ( in vivo exposure). A secondary aim is to investigate the role of personality pathology, panic appraisals, and chronic hyperventilation in predicting treatment responses. To achieve these aims, 80 patients suffering from panic disorder with agoraphobia, stratified as to initial levels of panic severity and agoraphobic severity, will be randomized to one of the following treatment conditions: (a) panic inoculation, (b) in vivo exposure, (c) panic inoculation plus in vivo exposure, and (d) waitlist control. A multidimensional assessment battery including self-report, clinical ratings, behavioral assessment, structured personality interviews, and physiological recordings will be employed to assess the effects of treatment and to examine the role of personality pathology and chronic hyperventilation in predicting treatment response. This will begin to address the issue of the right treatment (or combination of treatments) for specific subgroups of patients, an important consideration in the treatment of this common and often disabling disorder.